11S. Sunderasan, Enabling Environment: A Worm’s Eye View of Environmental Finance, DOI 10.1007/978-81-322-0882-2_2, © Springer India 2013

Introduction

Elections in a democratic setup provide an opportunity for competing political formations to highlight and to consequently obtain endorsement of their ideas and of the policies advocated by them. 1 Nordhaus ( 1989 ) holds that the voters care about the economy, while politicians care about power, leading us to conclude that in a democracy, government’s objective is to remain in of fi ce but is required to face elec-tions at prede fi ned intervals. However, elections in India, the world’s largest democ-racy, seem to have been “dominated by fundamentalist and divisive issues that surface during election time” (Sthanumoorthy and Mary 2004 ) , while discussions on economic issues remain in the background. On several occasions, and in many of the provinces, it is believed that when people cast their vote, they generally vote their caste or religion or ethnic group. Mohapatra ( 2000 ) re fl ects on this inherent contradiction between intention and consequences and concludes that the election is not a perfect mirror in which the essence of the everyday politics is viewed in India, and “in fact, the mismatch, as well as the occasional overlap between the two, characterizes India’s electoral democracy of the last 50 [odd] years.”

An apparent exception to the norm was the victory for the Telugu Desam Party (TDP) in the September 1999 elections to the Andhra Pradesh state legislature,

Chapter 2 The Irrelevance of Political Populism

Politicians are the same all over. They promise to build a bridge even where there is no river.

Nikita Khrushchev Soviet Russian politician (1894–1971)

1 An earlier version of this article is at an advanced stage of review for publication with a reputed journal.

12 2 The Irrelevance of Political Populism

which was hailed a vote in favor of focused effort, transparent administration, and sophisticated management of the development process as opposed to political rheto-ric or the usual “irrepressible urge to enthrall audiences” (Harshe and Srinivas 1999 ) . And yet, ironically, the very economic reforms seem to have led to the TDP government’s downfall 5 years later in 2004, with those whose economic condition did not improve over the 5 year period, expressing their discontent by voting against the incumbent (Ayyangar 2004 ) . Consequently, governments in power have tried hard to highlight the “feel-good” factor and to enhance positive sentiments on the eve of elections, culminating with the now satirical “India Shining” campaign by the then in-power Bharatiya Janata Party (BJP) in 2004.

The populist measures (or promises) employed to generate short-term gains for incumbents (challengers) include subsidy announcements, loan waivers, softening of interest rates to help reduce loan payouts, exchange rate manipulation to reduce prices, etc. What follows herein is a systematic assessment of the impact of such populist initiatives launched immediately prior to elections, and consequently, a political party’s ability to retain or assume power. This article employs the manipu-lation of administered prices of petroleum distillates – petrol and diesel – as a proxy for such populist measures. Although fuel prices are important on their own accord, they are tracked more intensely for their impact on the price levels of other com-modities and services of common consumption.

Additionally, being in power at the central government or participation in the ruling coalition at the federal level is slated to provide leverage for an incumbent political party to manipulate policy. The time elapsed in transferring a change in price of petrol and diesel to other commodities of common consumption is used as a benchmark time window to study the effectiveness of the micromanagement of fuel prices. Since politicians in of fi ce are the ones in a position to manipulate prices to their advantage, and since politicians in opposition can merely oppose price hikes, this article assesses the reelection probability of the incumbent politicians, consequent to their decision to micromanage fuel prices immediately prior to elec-tions. Conversely, it also seeks to bring out the fact that such price evolution is intertwined with the electoral process since the announcement of revised price lev-els is a highly publicized event with the federal government micromanaging prices directly or through government-owned oil marketing companies and taking visible responsibility for the same.

Overview of Price Controls and the Political Process

Price controls are slated to yield immediate political gains whereas the associated distortions and economic costs become evident only in the long run, even as the same cannot be mapped directly onto the price controls. Such irregularities, combined with the short attention spans of the voting public, are exploited in democracies in general and in India in particular. Agenor and Asilis ( 1993 ) have studied the interactions between electoral considerations and the imposition of price controls by opportunis-

13Anecdotal Evidence and Motivation for the Study

tic incumbent politicians and have demonstrated that price controls are imposed in periods leading to the election and are removed immediately afterward. Stretching the argument further, Ozatay ( 2005 ) studies electoral in fl ation cycles and provides empirical evidence of preelection manipulations of public sector enterprise pricing in Turkey during the period 1987–2003.

In India, despite the much talked-about liberalization of the economy, the political process and its participants continue to exert a considerable in fl uence on economic outcomes in the country. For instance, Kakani and Ghalke ( 2006 ) have found that parliament’s merely being in session, and the consequent uncertainty associated with policy decisions, coincides with wealth destruction on the stock markets and parlia-ment’s being in recess correlates with an increase in wealth. Iyer and Mani ( 2009 ) observe discernable patterns of the incumbent’s political in fl uence on frequent geo-graphical transfers or reassignments of bureaucrats across posts, either to strengthen their own positions or to limit the opposing politicians’ options, thereby adversely affecting poverty alleviation in such districts. Worse, Cole ( 2008 ) fi nds “compelling evidence of political capture” based on a substantial increase in agricultural credit disbursed by public sector (government owned) banks, especially in the marginal constituencies, in election years. He also observes that loan defaults increase around election time, and the incumbents choose look the other way, while the enhanced credit fl ow appears to have no impact either on agricultural investment or output.

Over the years, the highly regulated energy sector, among others, has been subject to intense scrutiny. Illustrating the con fl ict between economics and populism, Dossani and Ranganathan ( 2004 ) stress the importance of the political will required to reform the heavily subsidized electricity prices, especially in rural India, to ensure cost recovery for the electricity utilities. The prices of petroleum products in India are caught in an opaque web of cross-subsidies, taxation, and normative pricing, as re fi ned products such as petrol (gasoline), diesel, and kerosene are retailed at prices determined by the federal government (Sridhar 2008 ) . Despite the cosmetic, and obviously temporary, restructuring of the administered price mechanism (APM), over the years, the upward revision in retail prices of distillates, to remain consistent with cost recovery for the re fi ners, continues to test the federal government’s ability to push through politically unpalatable decisions in the larger interest of the economy. Retail fuel prices, which tend to feed into the in fl ation in commodity prices faced by the voter-consumer, are therefore driven more by political considerations than by economic compulsions from increasing input prices. This con fl ict of interests and political intransigence has been exposed during periods of consistently high international crude oil prices.

Anecdotal Evidence and Motivation for the Study

Given that political parties holding of fi ce prefer to enhance the “feel-good” factor prior to an election, we hypothesize that they refrain from increasing retail prices of petroleum products on the eve of elections or prefer to lower prices

14 2 The Irrelevance of Political Populism

immediately prior to elections. Conversely, retail prices would be hiked immedi-ately after election dates and hence, the timing of such price hikes, would be dictated by election schedules for the central and state governments, which in India, tend to be scattered across the calendar. Further, given the logistic- and security-related challenges involved, most polls are spread over several weeks from start to fi nish, preceded by a campaign and followed by counting of votes and declaration of results. On occasion, retail prices are actually reduced in the weeks immediately preceding elections and increased immediately after poll week. Further, when such hikes are inevitable, a proportion of the hike is usually rolled back “ceremonially” to placate coalition partners and opposi-tion parties or to bolster the ruling party’s own image in view of forthcoming polls.

This article analyzes the outcomes of 44 elections held between April 2000 and March 2007, conducted to fi ll the legislative assemblies of states (and union administered territories) and for the parliament (in 2004). A summary view of the statistics relating to the timing of price changes during the electoral cycle indi-cates that of the 30 occasions where retail prices of petrol have been revised upward over the 7-year horizon, 19 instances have been registered between 1 and 5 weeks after an election. Of the 20 instances when prices have been revised downward , 8 have been announced between 1 and 5 weeks immediately prior to an election.

This article, therefore, goes on to assert that the motives, and the desired outcomes, of such micromanagement are political rather than economic. Over the years, unbundling of production and service delivery operations, more fl exible global labor markets, and improved monetary policy responses combined with growing contri-butions from services have meant that the macroeconomic impact of oil shocks has been milder (Blanchard and Gali 2007 ) . Simultaneously, retail gasoline demand is observed to be substantially more inelastic in recent years, compared to the 1970s (Hughes et al. 2006 ; Ramanathan 1999 ) . In all, it could be concluded that the price manipulation has no real economic impact on consumption patterns, and that myopic political and economic tinkering (EPW 2006 ) and populism as an immedi-ate method for support mobilization (Bharucha 2003 ) takes precedence over a long-term development perspective.

This article examines the trends in price management around polling dates for the period January 2000–March 2007, with a view to studying incumbent behavior and linking the same to electoral outcomes. The analysis is then extended to verify the success or otherwise of the price management in returning the incumbent to of fi ce, at the center or at the state level. The theory can be schematically summa-rized as follows:

Presence in the Federal Govt.

Leverage to in fl uence fuel pricing policy

Fuel price manipulation

Price in fl ation diffused

Favourable electoral outcome

15Econometric Model

Econometric Model

Since India imports about three quarters of its crude oil requirements, retail prices should largely be driven by international crude price movements. 2 In the fi rst step, the following model is employed to ascertain the response of retail prices to changes in international prices.

( )Domestic retail price of fuel international crude pricef= (2.1)

In the second step, the Granger-causality test is employed to help estimate the lag length for the transfer of fuel price changes to the general price level, mea-sured by the wholesale price index as in Eq. 2.2 . As for the magnitude of the price hike, economic rationale would dictate that it would re fl ect the de fi cit caused by rise in crude oil prices subsequent to the previous price adjustment. However, in general, the incumbent political formation would not prefer to be seen as taking measures that would hurt the interests of the voter-consumer. This de fi cit is thus passed on to the consumers in spaced installments, thus hoping to soften the impact, with the magnitude and spacing dictated by the timing of next election on the horizon. The government-owned oil marketing companies act as buffers to absorb the higher input costs until such time that retail prices are further revised upward.

This article hypothesizes that the magnitude of the price hike is determined as the value that is transferred into the prices of other commodities (measured by the wholesale price index) and hence is in effect “dissipated”:

( )Domestic general price level Domestic retail price of fuelf= (2.2)

Data on elections held and related parameters is obtained from information published by the Election Commission of India. 3 The elections held in India between 2000 and March 2007 and their outcomes are listed in Table 2.8 annexed to this article. A house is normally elected to of fi ce for a fi xed term of 5 years. However, midterm elections are called when coalitions fall apart and houses are dissolved as a result. Weekly index data relating to prices of petrol and diesel and the all-commodity wholesale price index, for the period under study, are obtained from the webpage of the Economic Advisor to the Ministry of Commerce and Industry, 4 Government of India.

2 See for instance, DiCecio ( 2006 ) . 3 http://eci.gov.in/ 4 http://eaindustry.nic.in/ ; Economic Advisor to the Ministry of Commerce and Industry, Government of India.

16 2 The Irrelevance of Political Populism

Employing weekly average spot prices of benchmark crude oil published by the US Government’s Energy Information Administration 5 and the corresponding US Dollar-Indian Rupee exchange rates published by the Reserve Bank of India 6 (RBI), the weekly Indian-Rupee-denominated crude oil spot prices have been computed to eliminate the volatility in the Rupee-US Dollar exchange rate.

Response of Domestic Retail Prices to Changes in International Oil Prices

It is observed from the OLS regression that the variation in simulated spot prices accounts for 87.5 and 85.0% of the volatility in the index of petrol and diesel prices, respectively. The results for the OLS regression for the model hypothesized in Eq. 2.1 are presented in Table 2.1 .

Evidently, a part of the unexplained variation is on account of long-term supply arrangements as opposed to spot prices simulated herein and the composition of the crude oil actually imported by India. Further, consumers have generally come to expect that retail prices respond almost instantaneously to oil price increases and rather sluggishly to oil price reductions , until, for instance, the retailing fi rms are convinced that the cost change will last (Stuber 2001 ) . Grasso and Manera ( 2007 ) have analyzed models that capture this asymmetric response in retail prices subse-quent to changes in crude oil prices and report signi fi cant differences across coun-tries, especially in the transmission of price variations between the re fi nery and retail stages. The residual discrepancy indicated by the lagged response of domestic retail prices could be attributed to subjective considerations, namely, poll schedules in the Indian context 7 as has been frequently observed.

Transfer of Changes in Retail Fuel Prices to the General Price Level

Intuitively, it is evident that increases in prices of transportation fuels would feed into commodity prices across the board through transportation costs for people and for goods and would re fl ect in evolving price indices. Testing for causality (Granger 1969 ) involves using F -tests to ascertain whether the time-lagged information on

5 http://tonto.eia.doe.gov/dnav/pet/hist/wtotworldw.htm 6 http://www.rbi.org.in 7 Incumbents prefer to keep prices stable or reduce prices prior to elections. However, the “model code of conduct” formulated by the Election Commission of India prohibits such actions after noti fi cation of the election, as they could possibly in fl uence voters to favor the party in power.

17Econometric Model

variable Y provides any statistically signi fi cant information about a variable X in the presence of lagged X . If not, it is concluded that “ Y does not Granger-cause X .” By discounting the possibility that in fl ation measures could lead to changes in prices of petroleum distillates, the test provides us with an indication of the time taken for the transmission mechanism to unravel.

A particular lag length p is assumed, and the autoregressive bivariate vector is speci fi ed to estimate the following unrestricted equation by ordinary least squares (OLS):

1

1 1

p p

t i t i i t i ti i

x c x y u- -= =

= + + +å åa b

0 1 2: 0pH b b b= =¼= =

An F -test of the null hypothesis is then conducted by estimating the following restricted equation also by OLS:

1

1

p

t i t i ti

x c x eg -=

= + +å

Their respective sums of squared residuals are then compared.

2 21 0

1 1

ˆ ˆT T

t tt t

RSS RSS e= =

= =å å�

If the test statistic

0 11 2 1

1

(RS RS ) /~ ,

RS /( 2 1) p T p

S S pS F

S T p - -

-=

- -

is greater than the speci fi ed critical value, then the null hypothesis that Y does not Granger-cause X is rejected.

Table 2.1 OLS results relating the movement in domestic retail prices in response to international crude oil prices (model Eq. 2.1 )

Retail petrol prices Coef fi cients t stat

Intercept 99.20477251* 52.07682 International crude oil prices 0.056128101* 51.37366

R 2 0.875300697

Retail diesel prices Coef fi cients t stat

Intercept 113.7852444* 23.052042 International crude oil prices 0.130700767* 46.168941

R 2 0.850054103

*Signi fi cant at 99%

18 2 The Irrelevance of Political Populism

The test has been employed in diverse settings and frequently involving macroeconomic variables. For instance, Hoffmann et al. ( 2005 ) test for Granger causality between foreign direct investment (FDI) and pollution levels in the host country and conclude that higher pollution levels Granger-cause inward FDI fl ows in low-income countries, while the causality is reversed in middle-income countries. Liu et al. ( 2008 ) employ the Granger-causality test to identify the causal relation-ship between economic growth and public expenditure and identify a unidirectional Granger causality between federal outlays and change in GDP. The authors observe that total federal outlays do result in a change of GDP and not vice versa, and hence an increase in federal outlays, especially on the development of human resources, would contribute to GDP growth. In the Indian context, Ghosh ( 2002 ) con fi rms the existence of a unidirectional Granger causality leading from economic growth, measured by GDP per capita, to electricity consumption per capita.

The results of the Granger-causality tests between wholesale price index numbers and retail fuel prices for the model hypothesized in Eq. 2.2 are presented in Tables 2.2 , 2.3 , 2.4 , and 2.5 , respectively, for petrol and diesel: In each case, the test statistic F

p peaks for a lag order of 42 weeks, though the coef fi cients are not

statistically signi fi cant. The hypothesis that the evolution in wholesale prices is driven by the movement in

fuel prices is con fi rmed. A unidirectional Granger-causality relation is observed between petrol/diesel prices and in fl ation in the economy (measured by the wholesale price index). In other words, changes in petrol and diesel prices, themselves resulting from changes in international crude oil prices, are “dissipated” into in fl ation measures in the economy with a lag of approximately 42 weeks. This observation con fi rms that an increase in retail fuel prices contributes to heightened in fl ation in the Indian econ-omy over time. In the present context, since prices are administered by the federal government and not determined by market forces, the possibility of a reversal in cau-sality is ruled out – that rising in fl ation could Granger-cause increases in fuel prices.

In fl uencing Policy and Winning Elections

It is hypothesized that the participation of a regional party in the coalition at the federal (“union” or “central” government) level should provide it with suf fi cient leverage to in fl uence federal policies that could have a potential impact on state-level electoral outcomes. A political party that forms part of the political formation governing the union and simultaneously holding power in a particular state could therefore have fuel price hikes put off until after the election, with a hope of retaining power in that state. 8

8 Evidently, smaller political parties could form part of the coalition and yet not subscribe to all the populist decisions taken: Worse some parties could offer “support from the outside” which the voters have tended to interpret as being opportunistic and attempting to have the power without owning up to the responsibility. As price manipulation is the ruling coalition’s decision, in the present instance, the coalition is viewed as a single block, with all constituents working in unison and involved in fuel price-related decisions, irrespective of their independent ideological posturing. Similarly, political parties outside or the ruling coalition are presumed to have no role to play in such pricing decisions.

19Influencing Policy and Winning Elections

Table 2.2 Select OLS regression results to illustrate in fl uence of retail petrol prices on in fl ation (model Eq. 2.2 )

OLS regression results

Independent variable: petrol price index

Lag order (week) X 1 X 2 X 5 X 9 X 13 X 16

0 0.4686 (76.0704)

1 0.3776 0.09024 (12.8418) (3.1640)

4 0.37369 0.08963 (13.1816) (3.2606)

8 0.36758 0.08446 (13.6509) (3.2273)

12 0.36370 0.06629 (13.9366) (2.6145)

15 0.36102 0.04992 (14.0211) (1.9962)

t -statistic shown in parenthesis below respective coef fi cients

Table 2.3 Select test results to illustrate causality test of retail petrol prices and in fl ation (model Eq. 2.2 )

H0: Petrol price hike does not Granger-cause in fl ation

Lag length (week) Probability F computed

F critical

a Remark

6 0.94086 0.2915 1.18 H0 sustained 8 0.97316 0.2772 1.22 H0 sustained 10 0.97296 0.3295 1.22 H0 sustained 42 0.32833 1.09502 0.95 H0 rejected 43 0.35704 1.07496 0.96 H0 rejected 44 0.37303 1.06418 0.97 H0 rejected 45 0.44585 1.01934 0.99 H0 rejected

a Source: http://stattrek.com/

Table 2.4 The causality test of retail petrol prices and in fl ation (model Eq. 2.2 )

Petrol prices In fl ation In fl ation Petrol prices

Lag (weeks) F -test ( p -value) F -test ( p -value)

42 1.09502 (0.32833) 0.94509 (0.57190) 43 1.07496 (0.35704) 0.89212 (0.66497) 44 1.06418 (0.37303) 0.87821 (0.69055) 45 1.01934 (0.44585) 0.93916 (0.58635)

Alternatively, price hikes could be scheduled to provide for adequate time for their impact to be dissipated into other commodities, and perhaps more importantly, from public memory. The following model is employed to assess the probability of retaining (or assuming) power in a province (“state”), given the participation of a

20 2 The Irrelevance of Political Populism

state-level political party in the coalition in power at the central level, other parameters held constant .

( ) ( )Retaining power in the state Party part of the Federal govt

t tf=

(2.3)

The results of this OLS estimation are presented in Tables 2.6 and 2.7 . A regional party’s participation in the federal government and its potential ability to in fl uence fuel pricing policy that could help retain power in a state is found statistically insigni fi cant, as shown in Table 2.6 . Similarly, participation in the federal govern-ment and control on pricing policy, among others, does not help bring about a change in governments in the states as illustrated by the results in Table 2.7 .

Discussion: Statistical Results in Perspective

This article analyzes the outcomes of 44 elections between April 2000 and March 2007, held to fi ll the legislative assemblies of states and union territories and the parliament (in 2004). Patterns of overlap between a political party’s presence in the

Table 2.5 The causality test of retail diesel prices and in fl ation (model Eq. 2.2 )

Diesel prices In fl ation In fl ation Diesel prices

Lag (weeks) F -test ( p -value) F -test ( p -value)

40 1.02149 (0.44150) 0.90190 (0.64225) 41 1.03056 (0.42698) 0.86771 (0.70100) 42 1.06481 (0.37298) 0.94875 (0.56555) 43 1.05119 (0.39377) 0.91656 (0.62298) 44 1.05642 (0.38519) 0.90969 (0.63667) 45 1.01439 (0.45426) 0.95685 (0.55491)

Table 2.7 Price manipula-tion and the ability to change regime (model Eq. 2.3 )

Coef fi cients t stat

Intercept 0.666666667 6.620127 Incumbent in power

at the federal level −0.095238095 −0.57404

R 2 0.009070295

Coef fi cients t stat

Intercept 0.333333333 3.310064 Incumbent in power

at the federal level 0.095238095 0.574038

R 2 0.009070295

Table 2.6 Price manipulation and the ability to retain power (model Eq. 2.3 )

21Discussion: Statistical Results in Perspective

union government (as a lead party or as a coalition member) and eventual electoral results are mapped, with a view to suggesting an in fl uence on the state-level electoral outcome through the manipulation of administered prices, among others.

The Ability to In fl uence Pricing Policy

It is observed that of the 44 elections studied, 17 of the victors have been a part of the Central government. More signi fi cantly, 25 (57%) of the election outcomes represent a regime change at the state. It is also observed that smaller states (and union territories) with 40 or fewer members, namely, Pondicherry (30), Sikkim (32), Mizoram (40), and Goa (40), frequently return the ruling party to power, possibly owing to greater transparency in governance and increased accountability of the representatives. The increased proximity to the voters could also prevent defection by members which could tilt the balance of power on the fl oor of the house. Further, these states contribute few members to the 552 member lower house of parliament: 1, 1, 1, and 2, respectively – probably not sizable enough to in fl uence federal policy.

Of the larger houses, Karnataka, for instance, has had three chief ministers (heads of provincial governments) belonging to three rival political parties between 2004 and 2008 in a series of attempts to build coalitions. Further, attempts at a rigorous quantitative analysis are defeated by the amorphous nature of the coalitions them-selves. The DMK party from Tamil Nadu, for instance, switched sides during the run up to the 2004 parliamentary elections, thereby managing to stay on as a partner in both rival political formations, pre and post elections.

The In fl uence of Pricing Decisions on Electoral Outcomes

The longest time window between sets of elections in the sample is from February 2000 to May 2001. This singular lull in electoral activity also overlaps with the longest period between a double-digit increase in petrol and diesel prices, 11.5 and 42.4%, respectively, and the next election, that is, 31 weeks. (Diesel prices were hiked again by 2.1% in early March 2001, 9 weeks to the election.) A signi fi cant portion of the impact of the price rise should have been dissipated by the time of the election. However, none of the victors of the elections in May 2001 were constitu-ents of the ruling coalition at the federal level.

In yet another instance, between May 2006 and March 2007, a 38-week spacing between two sets of elections, the prices of petrol and diesel were raised by 22.4 and 30.2%, respectively, 4 weeks after the preceding election, thus providing for a clear 34 weeks for the increase to be transferred onto other commodities. Further, in order to negate the effect of the previous hike, petrol prices were lowered by 11.1%, 9 weeks to the election and by an additional 11.2% during the election

22 2 The Irrelevance of Political Populism

window of February 2007. Simultaneously, the price hike in diesel was also rolled back in two stages, 15% 10 weeks to the election and 15.1% during the election window. In effect, this should have been viewed as a net reduction in prices of either distillate, as some part of the price hike would have dissipated into other prices of other commodities, measured by the wholesale price index. However, such meticulous micromanagement of the prices does not seem to have in fl uenced the voter-consumer, as the members of the ruling coalition in the center managed to retain power only in the relatively small state of Manipur and only by a wafer-thin margin.

Conclusions

Mere participation in the federal government, and thereby earning the opportunity to exert an in fl uence on policy matters, does not seem to contribute to winning elec-tions. Further, it takes about 42 weeks for the increase in petrol/diesel prices to be transferred to the prices of other commodities (re fl ected by the wholesale price index). This time window clearly applies exclusively to fuel price modi fi cations, and impact of other populist measures would have to be similarly analyzed. Even as higher prices result in lower real incomes for most citizens, the composition and timing of consumption baskets are routinely and continually revised to accommo-date such price changes. Elections are consciously scheduled after providing for adequate time for the price revision to be fully dissipated, thereby fading from the memory of the voter-consumers. Given the frequency of elections in India, and the functional autonomy of the Election Commission of India, it is highly unlikely that the federal government would have the option of providing for 42 weeks between elections, assuming that retail prices are hiked immediately after one set of elections.

The above statistical analysis points to no speci fi c direction and is consistent with the literature cited. Ceteris paribus , increasing the price of distillates and allowing for the dissipation of its effects do not seem to help win elections. Leveraging presence in the federal government to put off price increases until after the elections does not seem to in fl uence electoral outcomes either. Conversely, economists have argued that refusal to increase retail prices in tandem with global crude prices should be viewed as pro fl igacy by the taxpayer-voter and hence should result in electoral defeat for the ruling coalition (Aiyar 2008 ) . Alesina et al. ( 2011 ) observe that governments that make large adjustments to rapidly reduce fi scal de fi cits by cutting down on government expenditure or raising taxes, or both, are not necessarily doomed to face electoral defeat. They go on to conjecture that incumbent governments might prefer to postpone fi scal reforms even when they are necessary and unavoidable, purely with a view to not disrupting the “business-as-usual” scenario. Such risk aversion apart, they also believe that lobbies and pressure groups could stall reforms and in fl uence the political processes with narrow self-interest in mind.

23Conclusions

Tabl

e 2.

8 E

lect

ion

date

s an

d ou

tcom

es: 2

000–

2007

Yea

r an

d ho

use

bein

g el

ecte

d Po

lling

dat

es

Old

gov

t N

ew g

ovt

Cen

tral

gov

t Sm

all/b

ig

Win

ner

part

of

cen

tral

gov

t?

Ret

aini

ng p

ower

in

sta

te

Cha

nge

of g

ovt

in s

tate

(=1

if h

ouse

<

50 m

embe

rs)

(=1

if n

ew s

tate

go

vt is

par

t of

cent

ral g

ovt)

(=1

if s

tate

is

reta

ined

by

part

yin

cen

ter)

(=1

if th

ere

is a

ch

ange

in g

ovt)

2007

Pu

njab

13

Feb

C

ongr

ess

SAD

U

PA

0 0

1 M

anip

ur

8 Fe

b–23

Feb

C

ongr

ess

Con

gres

s U

PA

1 1

0 U

ttara

ncha

l 21

Feb

C

ongr

ess

BJP

U

PA

0 0

1 U

ttar

Prad

esh

7 A

pr–8

May

SP

B

SP

UPA

0

0 1

2006

A

ssam

3

Apr

–8 M

ay

Con

gres

s C

ongr

ess

UPA

1

1 0

Ker

ala

Con

gres

s C

PI(M

) U

PA

0 0

1 Po

ndic

herr

y C

ongr

ess

Con

gres

s U

PA

1 1

1 0

Tam

il N

adu

AIA

DM

K

DM

K

UPA

1

0 1

Wes

t Ben

gal

CPI

(M)

CPI

(M)

UPA

0

1 0

2005

B

ihar

(re

elec

tion)

18

Oct

–19

Nov

R

JD

JDU

U

PA

0 0

1 20

05

Bih

ar

3 Fe

b–23

Feb

R

JD

RJD

U

PA

1 1

0 Jh

arkh

and

BJP

B

JP

UPA

0

1 0

Har

yana

IN

LD

C

ongr

ess

UPA

1

0 1

2004

Lo

k Sa

bha

(200

4)

20 A

pril

–10

May

04

BJP

C

ongr

ess

ND

A

0 0

1

Ori

ssa

20 A

pr–1

0 M

ay

BJD

B

JD

ND

A

1 1

0

(con

tinue

d)

24 2 The Irrelevance of Political Populism

Yea

r an

d ho

use

bein

g el

ecte

d Po

lling

dat

es

Old

gov

t N

ew g

ovt

Cen

tral

gov

t Sm

all/b

ig

Win

ner

part

of

cen

tral

gov

t?

Ret

aini

ng p

ower

in

sta

te

Cha

nge

of g

ovt

in s

tate

(=1

if h

ouse

<

50 m

embe

rs)

(=1

if n

ew s

tate

go

vt is

par

t of

cent

ral g

ovt)

(=1

if s

tate

is

reta

ined

by

part

yin

cen

ter)

(=1

if th

ere

is a

ch

ange

in g

ovt)

Kar

nata

ka

Con

gres

s C

ongr

ess

ND

A

0 1

0 A

ndhr

a Pr

ades

h T

DP

Con

gres

s N

DA

0

0 1

Sikk

im

SDF

SDF

ND

A

1 0

1 0

Mah

aras

htra

13

Oct

Sh

iv S

ena

NC

P/C

ong

UPA

1

0 1

2003

H

imac

hal P

rade

sh

26 F

eb

Con

gres

s B

JP

ND

A

1 0

1 M

egha

laya

C

ongr

ess

Con

gres

s N

DA

0

1 0

Nag

alan

d C

ongr

ess

NPF

N

DA

1

0 1

Tri

pura

C

PI(M

) C

PI(M

) N

DA

0

1 0

Chh

attis

garh

20

Nov

–1 D

ec

Con

gres

s B

JP

ND

A

1 0

1

Mad

hya

Prad

esh

BJP

B

JP

ND

A

1 1

0 D

elhi

C

ongr

ess

Con

gres

s N

DA

0

1 0

Raj

asth

an

Con

gres

s B

JP

ND

A

1 0

1 M

izor

am

MN

F M

NF

ND

A

1 1

1 0

2002

G

ujar

at

12 D

ec

BJP

B

JP

ND

A

1 1

0 Ja

mm

u an

d K

ashm

ir

24 S

ep

NC

PD

P N

DA

0

0 1

Goa

30

May

B

JP

BJP

N

DA

1

1 1

0 Pu

njab

13

Feb

–21

Feb

SAD

C

ongr

ess

ND

A

0 0

1 M

anip

ur

Sam

ata

Part

y C

ongr

ess

ND

A

0 0

1

Tabl

e 2.

8 (c

ontin

ued)

25Conclusions

Utta

ranc

hal

BJP

C

ongr

ess

ND

A

0 0

1 U

ttar

Prad

esh

BSP

SP

N

DA

0

0 1

2001

Ta

mil

Nad

u 10

May

200

1 D

MK

A

IAD

MK

N

DA

0

0 1

Wes

t Ben

gal

CPM

C

PM

ND

A

0 1

0 K

eral

a C

ongr

ess

Con

gres

s N

DA

0

1 0

Pond

iche

rry

Con

gres

s C

ongr

ess

ND

A

1 0

1 0

Ass

am

AG

P C

ongr

ess

ND

A

0 0

1 20

00

Har

yana

12

Feb

–22

Feb

HV

P IN

LD

N

DA

0

0 1

Bih

ar

JDU

R

JD

ND

A

0 0

1 O

riss

a C

ongr

ess

BJD

N

DA

1

0 1

Man

ipur

C

ongr

ess

Sam

ata

Part

y N

DA

0

0 1

26 2 The Irrelevance of Political Populism

The apparent irrelevance of populist measures such as fuel-price manipulation could emanate from the fact that, over time, the patterns have been predictable and that most voters build them into their in fl ation expectations ex-ante . Analysts have observed that shrinking ideological differences among political parties and unstable political formations combined with equally uninspiring performance of incumbents ultimately decide electoral fortunes. While most incumbents attribute their electoral debacles to “anti-incumbency,” a commonly employed euphemism for nonperfor-mance, factors motivating voting behavior are still unclear, to the extent that some observers have concluded that micromanagement of administered prices in particu-lar and sound economic performance in general, do not necessarily win elections for the incumbents (Aiyar 2007 ) . Heath ( 2005 ) concludes that electoral volatility in India can be explained by the party system format and the polarization of society consequent to the politicization of social divisions; this eventually in fl uences vote switching between competing parties and political formations. Chong et al. ( 2011 ) observe that voters need to have relevant information on their governments’ perfor-mance to be able to use elections as control measures. Such information is neces-sary but not suf fi cient and would need to be reinforced with effective institutions, an independent and expeditious judicial system and independent audit and account-ability of fi ces to enhance the legitimacy and effectiveness of the political system (Table 2.8 ).

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